Insider Trading Trial Begins for Mulheren : Securities: The former associate of Ivan Boesky is also accused of manipulation and parking stock for his former friend.
A prosecutor portrayed former stock speculator John A. Mulheren Jr. as a willing participant with Ivan F. Boesky in insider trading and stock-market manipulation as lawyers made opening arguments Thursday in Mulheren’s criminal trial.
Mulheren, 40, formerly head of the now-defunct Jamie Securities Co., is accused in a 41-count federal indictment of using information leaked by Boesky to engage in illegal insider trading. The indictment also charges that he performed illegal favors for Boesky, including “parking” securities to help Boesky evade income taxes and manipulating the price of Gulf & Western stock.
Assistant U.S. Atty. E. Scott Gilbert, the lead prosecutor in the case, charged that Mulheren’s relations with Boesky were a “two-way street,” with each willing to do illegal favors for the other. Boesky, believed to have engaged in widespread insider trading, pleaded guilty in 1987 to a single felony count. He was sentenced to three years in prison, paid $100 million in penalties and has since cooperated with prosecutors in many major securities fraud cases.
Boesky is expected to testify against Mulheren, perhaps as early as Monday. As expected, defense lawyers said the credibility of Boesky, probably the most notorious inside trader ever, will be a major issue. Boesky’s testimony will mark his debut as a trial witness for the government.
Gilbert noted that both Boesky and Mulheren in the early 1980s were in the business of “risk arbitrage,” speculating in the stocks and options of companies involved in takeover battles or mergers. Referring to the insider trading charges, Gilbert said: “In the business of risk arbitrage, information is like gold, and Ivan Boesky was willing to share his gold with John Mulheren.”
Concerning the parking charges, Gilbert said they involved false sales of securities by Boesky’s firm, Seemala Corp., to Jamie, so that it would appear that Seemala no longer owned the securities. This enabled Boesky to claim tax losses and to evade Securities and Exchange Commission rules concerning capital requirements for securities firms. But Gilbert said it also enabled Boesky secretly to retain ownership of the securities. “John Mulheren agreed to help Boesky to have his cake and eat it, too,” Gilbert said.
Evidence in the trial, taking place in U.S. District Court in Manhattan, is expected to include false bills allegedly meant to hide illegal payments from Boesky’s company to Jamie.
But Thomas Puccio, Mulheren’s lawyer, called Boesky the “king of greed” and said he is someone who “cheated and lied to friend and foe alike.” He claimed that Boesky is “someone who 100 priests and rabbis could not corroborate in this case.”
Puccio said it was normal for people in the securities business to do favors for one another. But he said that Mulheren had never done any illegal favors. And he said a major theme of the defense case will be Mulheren’s state of mind--that he never believed he was doing anything for Boesky that violated the law.
Mulheren, who is noted for his informal dress, appeared in court without a jacket or tie. In contrast to the conservative garb worn by most white-collar criminal defendants, Mulheren wore a white shirt with blue and maroon stripes, dark slacks and casual black shoes. Mulheren, who is well over six feet tall, vigorously shook his head in apparent disagreement at one point during the prosecutor’s opening argument.
Mulheren was arrested in 1988 when he allegedly left his New Jersey home with a loaded rifle, intending, police said, to shoot Boesky. Mulheren allegedly was angry that Boesky was giving evidence against him. Charges related to that incident, however, tentatively have been dropped. Mulheren formerly was a close friend of Boesky’s, as well as a business associate, and Boesky had made Mulheren a trustee for his children.
The rifle incident apparently won’t be mentioned to the jury in the current case. And Puccio told jurors that, in contrast to Boesky, Mulheren is “universally loved” and “someone all will agree is generous and kind as well as being brilliant.” Puccio briefly mentioned the chronic manic-depressive illness that Mulheren suffers from.
In addition to Mulheren, Leonard L. DeStefano, a former options trader at Jamie, also is a defendant in the case. His lawyer, Thomas Fitzpatrick, asserted that DeStefano in reality was merely a clerk who played no intentional role in any illegal activity.
The trial is expected to last up to six weeks.
